Budget proposes key sops for power sector

New Delhi, Feb 29 (IANS) India’s national budget for 2008-09 has proposed key fiscal initiatives that could help to attract more private investment in the power sector, said an industry expert. Finance Minister P. Chidambram presented the budget for the next financial year starting April 1 in the Lok Sabha Friday.

“The budget proposes to correct the fiscal provisions causing double taxation on dividend distribution in case of power projects set up through the special purpose vehicle (SPV) instrument,” said Kuljit Singh of the global consultancy firm Ernst and Young (E&Y).

Under the existing fiscal regime, both SPVs and their holding companies have to cough up dividend distribution tax, which is chargeable at 16.995 percent, he said.

The budget also proposed to set up a national fund to expedite reform of the power transmission and distribution sector, Singh said.

“The bulk of this fund will go to state electricity boards, which control a big chunk of the power transmission and distribution network in the country.”

“That will, in turn, lead to strengthening of the state-level power transmission and distribution network.”

The budget envisages setting up five more ultra mega power projects in Chhattisgarh, Karnataka, Maharashtra, Orissa and Tamil Nadu, subject to approval of the governments in these states, the E&Y consultant said.

“Though weak, this statement from the central government should be welcomed,” he said.